|* Is it worth living outside zone 1 to save money on transport?|
* If you were to choose, where would you live?
As others have said, I don't think there's much difference between zone 1 travel and zones 1-2... unless you can rule out a travelcard altogether and walk/cycle to work. That would be the Angel advantage.
Personally, though, I wouldn't fancy it with a family. Don't know Balham, so can't comment (but agree with Emma that Blackheath is lovely and quite convenient).
If you're working in the city, don't rule out Overground links. Personally, I love West Hampstead (doable on 60k, though getting more expensive; close to the Heath and Primrose Hill; villagey in feel but a 15-minute tube journey into the West End; lots of young professionals and families; good schools, etc.) and know several people living there who commute to city jobs.